MAC: Mines and Communities

Bolivia says it will stand up to threat of arbitration over stalled metals plant

Published by MAC on 2010-11-29
Source: Business News Americas (2010-11-22)

The dispute between Canadian firm, APM over "re-activation" of the stalled Karachipampa polymetallic processing plant in Bolivia, has reached a new pitch. For previous article, see: Bolivian workers take over plant, threatening to unseat Atlas

The company says it's ready to go to international arbitration to secure its aims. But the state mining company, Comibol, clearly regards this as an unwarranted move - if not active blackmail.

This would not be the first time that a Canadian company has made such a move: Vanessa Ventures did so against the government of Venezuela two years ago: Canadian legal threats to Venezuela

It seems that threats to use international legal instruments in order to undermine a state's control over its mineral resources, are on the increase - especially in Latin America. See: PacRim wins first stage of compensation battle against El Salvador

More often than not, the case never gets to court.

However, the process itself places a financial burden on government and delays implementation of state policy objectives.

And arguably, that is often precisely what it is intended to do. See also:

Tambogrande update: the arbitration is on

&

Dragons in the Indonesian mists

ESPAÑOL

State willing to go to international arbitration over Karachipampa - Bolivia

By Harvey Beltrán

Business News Americas

22 November 2010

The Bolivian state is willing to go to international arbitration over the contract to activate the Karachipampa polymetallurgical plant, state miner Comibol's president Hugo Miranda told BNamericas.

"We found out about this possibility through the declarations made by [Jorge] del Valle. If this is the way forward, we're prepared to go through with it," Miranda said.

Jorge del Valle is Canadian firm Atlas Precious Metals' (APM) lawyer. In 2005, the company signed a JV agreement with Comibol to activate the 51,000t/y plant to treat silver concentrates. APM has a 65% share and the Bolivian state holds the remainder.

However, in July APM requested the contract's dissolution, citing the government's decision to cash in the company's US$850,000 surety bond and the lack of land to construct the sulfuric acid and zinc plants as its principal reasons.

Costs

The state will go to any legal process without skimping on costs, a spokesperson from the mining and metallurgy ministry (MMM) told BNamericas.

"Arbitration can cost US$2mn-3mn, and the company asked for US$1mn, which it has dropped to US$850,000. The trial is more expensive than the compensation, so I believe an agreement will be reached," the spokesperson said.

Meanwhile, del Valle finds the government's reasoning difficult to understand.

"In any case, this amount is a gift because about US$5mn has already been invested. The offer was made so they would take it quickly... [The government] would rather go to arbitration - where it will pay about US$4mn - than pay the US$850,000," he told BNamericas.

If the matter goes to arbitration, the parties will split the costs of the process equally, according to the lawyer.

"But if it goes to judicial proceedings, which is what APM is hoping for, whoever loses will pay the costs, so the government is not considering that," he said.

Going to Court

Meanwhile, Miranda is waiting to find out if APM will accept the government's offer of US$680,000 for the project, but del Valle said that the company is no longer negotiating.

"We're just waiting for the arbitration and conciliation center at the national chamber of commerce] to confirm that it will not take action in the matter in order to go to court," del Valle said.

The lawyer reiterated that the company has been waiting 60 days for a response from the conciliation center but, "strangely, we have only received silence from this private organization," he said.

Karachipampa was completed in 1983 at a cost of US$500mn but has not yet seen production.

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